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The Iowa Senate gave approval to a bill that would offer a tax break to small businesses with up to 24 employees to encourage employers to help cover the cost of employee health insurance. The state measure would be on top of a federal tax break. The measure now goes to the House. The governor has not publicly taken a position on the bill.

Related Summaries

A proposal for an income tax break for small businesses that cover part of their employees' health insurance was endorsed by an Iowa Senate panel with bipartisan support. The legislation would add a state incentive to federal tax breaks for small businesses that cover at least half of employees' health insurance costs.

Representatives of payroll-processing companies asked Congress to change a Senate bill that would extend for two months the payroll-tax break. Implementing such a partial measure would be expensive and difficult, the National Payroll Reporting Consortium wrote in a letter.

Senate Democrats proposed a plan to pay for an extension of a soon-to-expire employee payroll-tax break with a blend of Republican and Democratic measures. Separate plans submitted by each party were defeated in the Senate last week. The new plan includes a tax on income exceeding $1 million, but at a lower rate than previously proposed. It also would set higher lender fees for government-sponsored mortgage giants Fannie Mae and Freddie Mac. The plan would not give employers a tax break.

Senate lawmakers tweaked two provisions included in a bill to extend some expired tax breaks after receiving complaints from small-business groups. A carried-interest provision and a measure that affects tax rates for S corporations were changed slightly, but Democrats still remain a few votes shy of the 60 needed to end debate on the bill.

Health care legislation in the House and Senate has raised concerns among small businesses that say provisions in the bills will force them to cut jobs. The House bill would place an 8% payroll tax on companies that do not offer health insurance to their employees. A Senate version places less financial penalty on employers who don't offer insurance. Some observers say that requiring small employers to offer health insurance could result in lower wages. "It's going to cost jobs," said Bruce Josten, executive vice president of the U.S. Chamber of Commerce.